Sunday, October 28, 2007

Countrywide Financial Corp. CFC Q3 2007

Overall --1st quarterly loss in 25 years, 1.2 bil or 2.85 diluated EPS --expect to be profitable Q4 07 --valuation adjustment -1 bil, credit loss (future expectation and charge-off) 1.9 bl Credit Metrics Loan Origination --impairment 690 mil, 30.8 bil exposure, 2% --realized and unrealized loss 1 bil --mortgage origination decreased from 123 bil to 90 bil MSRs --credit sensitive retained interest: writedown 690 mil, exposure (carry value) 0.9 bil, writedown ratio around 40% Bank and Warehouse lending --earning: -389 mil --provision: 784 mil, net charge-off: 126 mil, Pro/LCO: 6.5 --allowance: 1.1 bil, loan portfolio: 79 bil, 1.5% --Allowance/NPL: 78.67% vs 49.86% --ALL/LCO: alomst 10, historic high Delinquencies --Prime home equity loans total 5.76%, rising from 4.56% Q2 --conventional 1st lien 4.41% (90 days 1.44%), rising from 3.35% (90 days 1.02%) Liquidity --FHLB funding 51.1 bil, secured borrowing capacity 12 bil, ABCP facility with Park Monaco 10.4 bil, 6.3 bil of new whole loan/securities --33.6 bil highly reliable liquidiyt to fund op without tapping debt mkt Evaluation --share --BBB 9y bond 504 bps (highest 570 bps 10/25), 5y CDS 377 bps (10y 308, dropped 140 bps in a day) Ratings --SP ratings services lowered the long-term counterparty credit rating on CFC from A- to BBB+ --Countrywide Home loans Inc. from A to BBB+ --Countrywide Bank fsb from A to A- comments: --the company overreserve loan loss, relatively conservative, long its bond and buy 10y CDS or just simply long the bond

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